The Blockchain Association Speaks Out Against IRS Proposal
The U.S. Treasury and the Internal Revenue Service (IRS) are considering redefining a single word in a federal tax rule, a move that could have significant implications for decentralized finance (DeFi) projects in the United States. The Blockchain Association, a leading crypto lobbying group, submitted a 33-page comment to the IRS, outlining why the proposed change to the definition of the word “broker” would be detrimental to the American DeFi industry.
The proposed rule would expand the definition of “broker” to include any centralized crypto exchange operating in the United States or any crypto project that facilitates the transfer of digital assets belonging to another person. This broad definition would encompass DeFi protocols, subjecting them to the same reporting rules as traditional financial brokers.
According to the Blockchain Association, this standard is impossible to impose on DeFi projects and would drive them out of existence or force them to move abroad. The group argues that one of the fundamental principles of DeFi is creating trustless financial systems without central control over users’ finances and information.
Public Response and Regulatory Outlook
The proposed IRS rule has received over 124,000 public comments during a 74-day period. The IRS recently held a public hearing on the rule, where Marisa Tashman Coppel, senior counsel at the Blockchain Association, expressed cautious optimism about regulators taking concerns regarding decentralized tech seriously.
Hot Take: Potential Impact on DeFi Projects
The proposed redefinition of “broker” by the IRS could have far-reaching consequences for DeFi projects in the United States, potentially driving them out of existence or forcing them to relocate abroad. The strict reporting rules would undermine the fundamental principles of DeFi and pose significant privacy risks for users.
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